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Cotton is finally in the process of making its first correction to the sharp rally that started in early February. The correction started with yesterday’s long, slow retreat from the new high established in the May contract earlier in the session. This retreat accelerated overnight with the May contract losing 2 full cents at one point in the overnight session. This marks the biggest setback since the rally began on February 8th. However, losses in the nearby March contract have been much smaller than in the May contract, which maintains the bull spread tightness that has been a feature of the 2010 rally. The 2-day setback is not likely to be the start of a full reversal of the trend, however, merely a correction. It is also a signal that higher prices will at some point bring a scarcity of buyers, even in the export market where sales cooled to more moderate levels on last week’s Export Sales report reflecting the prices of two weeks ago. Traders will be looking closely at the next report on Thursday to see if sales will dip again and fall below the weekly average needed to reach the USDA’s export projection. That total is currently at 111,100 bales. May cotton made yet another new high for the year yesterday, moving to near 18-month highs in the process. The March contract led deferred contracts higher again yesterday, although it did so by a lesser margin that had been the case in some previous sessions, and this was followed by the setback into the overnight session. Weakness in some economic data related to jobs and housing in recent weeks may now get a closer look from cotton traders, with this Friday’s Unemployment number and Thursday’s Initial Jobless Claims possibly getting more attention from traders. Deliveries against the March contract as of March 2nd were 43 contracts, taking the total for the delivery period to-date to 3,355 contracts. Stocks registered for delivery against the ICE No. 2 cotton contract rose again yesterday to 556,846 running bales from the previous total of 552,817 running bales.
TODAY’S GUIDANCE: The May contract rallied nearly 17 cents without a significant correction over the past 4 weeks and price action over the past 24 hours indicates that the bull market in cotton will not be a complete runaway. The setback may take the May contract back into the range of support at 79.00 to 80.00 or perhaps as low as the January high at 77.83. However, this looks to be a buying opportunity in the May and July contracts with the longer term objective remaining near 90.00 cents in the May contract. First support is at 79.70 to 80.10 in the May contract. Light, near term resistance is at 82.45 to 82.50.
Cotton Market Commentary – 2010.03.02
by Terry Roggensack on March 2, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Cotton is finally in the process of making its first correction to the sharp rally that started in early February. The correction started with yesterday’s long, slow retreat from the new high established in the May contract earlier in the session. This retreat accelerated overnight with the May contract losing 2 full cents at one point in the overnight session. This marks the biggest setback since the rally began on February 8th. However, losses in the nearby March contract have been much smaller than in the May contract, which maintains the bull spread tightness that has been a feature of the 2010 rally. The 2-day setback is not likely to be the start of a full reversal of the trend, however, merely a correction. It is also a signal that higher prices will at some point bring a scarcity of buyers, even in the export market where sales cooled to more moderate levels on last week’s Export Sales report reflecting the prices of two weeks ago. Traders will be looking closely at the next report on Thursday to see if sales will dip again and fall below the weekly average needed to reach the USDA’s export projection. That total is currently at 111,100 bales. May cotton made yet another new high for the year yesterday, moving to near 18-month highs in the process. The March contract led deferred contracts higher again yesterday, although it did so by a lesser margin that had been the case in some previous sessions, and this was followed by the setback into the overnight session. Weakness in some economic data related to jobs and housing in recent weeks may now get a closer look from cotton traders, with this Friday’s Unemployment number and Thursday’s Initial Jobless Claims possibly getting more attention from traders. Deliveries against the March contract as of March 2nd were 43 contracts, taking the total for the delivery period to-date to 3,355 contracts. Stocks registered for delivery against the ICE No. 2 cotton contract rose again yesterday to 556,846 running bales from the previous total of 552,817 running bales.
TODAY’S GUIDANCE: The May contract rallied nearly 17 cents without a significant correction over the past 4 weeks and price action over the past 24 hours indicates that the bull market in cotton will not be a complete runaway. The setback may take the May contract back into the range of support at 79.00 to 80.00 or perhaps as low as the January high at 77.83. However, this looks to be a buying opportunity in the May and July contracts with the longer term objective remaining near 90.00 cents in the May contract. First support is at 79.70 to 80.10 in the May contract. Light, near term resistance is at 82.45 to 82.50.
Tags: Cotton, Softs
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